Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: B.C.’s biggest economic and business stories of 2019

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

As the new year beckons, it’s a good time to reflect on the major economic and business stories of the year that’s about to end. To keep the task manageable, the focus here is limited to Canada and B.C.

One surprising development in 2019 was the return to a period of falling interest rates.

When the year began, most economic forecasters were expecting both the Bank of Canada’s policy rate and market-based interest rates to continue creeping higher, on the heels of earlier rate increases in 2018.

Instead, the interest rates facing savers and borrowers dropped over the last half of 2019 – not just in Canada, but in the U.S. too.

As of late November, the market yield on 10-year bonds issued by the federal government stood at a paltry 1.6 per cent.

With inflation running around two per cent, this means buyers of 10-year government bonds are locking in a negative return after inflation. That would appear to be an unappetizing investment. Yet there is no shortage of demand for government bonds yielding microscopic returns.

READ MORE: Bank of Canada holds interest rate, warns economy’s resilience to be ‘tested’

Another notable story in 2019 was the continued troubles afflicting the Western Canadian energy sector, above all the oil and gas industry that accounts for up to one-fifth of Canada’s exports in a typical year.

While the Canadian industry has been innovating and cutting costs in an environment of lower prices, escalating government-imposed regulatory burdens, stalled pipeline development, and rising oil and gas production in the United States mean the overall energy landscape has shifted in ways that disadvantage Canada.

The result is tens of billions of dollars of foregone economic value because of persistent price discounts on Western Canadian oil vis-à-vis oil produced in the U.S., significant job losses in the Alberta energy patch, investment outflows to the U.S., and the departure from Canada of at least one major energy company head office – Encana – with more likely to follow.

All in all, energy policy and recent energy investment patterns show Canada in an unflattering light.

KEEP READING: Encana moves headquarters from Calgary to U.S., changes name to Ovintiv

For B.C., the crisis gripping the forest industry is clearly top of mind.

More than a dozen lumber manufacturing plants in the interior and north have stopped operating – some permanently. Thousands of well-paying jobs have disappeared, and more are at risk. Lumber production and export shipments are down significantly compared to 2018 levels, helping to drive a decline in B.C.’s total exports.

The NDP government has responded by providing some assistance to some laid-off forest workers and forestry-dependent communities. But it seems curiously indifferent to the long-term economic health of the province’s most important export industry.

Policy-makers are overlooking the fact that a viable B.C. forest industry depends on the presence of strong companies with the size and scale to withstand market cycles and invest in developing new markets and in keeping existing mills efficient.

It is troubling to watch the leading firms redeploying capital and shifting management attention to other provinces and the U.S.

READ MORE: Fewer trees, higher costs blamed for devastating downturn in B.C. forestry

Finally, there is housing. The past year brought a sharp decline followed by a jump in home sales, as the market adjusted to an onslaught of new and higher provincial taxes, the mortgage “stress test” introduced by the federal government, and other policy measures designed to cool demand and dampen speculation in the Lower Mainland, Greater Victoria, and the Kelowna area.

Housing prices have dropped markedly at the expensive end of the market, but much less so for the average property.

Homebuilding and housing starts in 2019 have been surprisingly resilient, considering the contemporaneous unwinding of froth in the market.

Some industry experts are forecasting a sizable decline in housing starts in 2020, as developers shelve or delay projects against the backdrop of recent policy measures. If starts do plunge, that will detract from economic growth in B.C. in 2020 and beyond.

But with rock-bottom interest rates and a rapidly growing population fueled by record levels of immigration, the demand for housing in “urban B.C.” is expected to remain elevated – a situation that should continue to support the development of new housing supply over the medium-term.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

B.C. Finance Minister Selina Robinson outlines the province’s three-year budget in Victoria, April 20, 2021. (B.C. government video)
B.C. deficit to grow by $19 billion for COVID-19 recovery spending

Pandemic-year deficit $5 billion lower than forecast

FILE – Wet’suwet’en hereditary chiefs have agreed to sign a memorandum on rights and title with B.C. and Ottawa, but elected chiefs are demanding it be called off over lack of consultation. (Thom Barker photo)
Wet’suwet’en hereditary chiefs, Lake Babine Nation get provincial funding for land, title rights

Government says it’s a new, flexible model for future agreements between Canada, B.C. and First Nations.

The property on which a residential school (pictured) that was torn down years ago in Lower Post is to be the location of a cultural centre. (Indian Residential School History and Dialogue Centre photo)
Lower Post residential school building to be demolished, replaced with cultural centre

Project to be funded by federal and provincial governments, Daylu Dena Council

Canadian Prime Minister Justin Trudeau and United States President Joe Biden smile as they say farewell following a virtual joint statement in Ottawa, Tuesday, February 23, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau pledges to cut emissions by 40% to 45% by 2030, short of U.S. goal

Trudeau announced target during a virtual climate summit convened by U.S. President Joe Biden

Richard Desautel with supporters outside the courthouse in Nelson, B.C., in 2016. Photo: Bill Metcalfe
BREAKING: Sinixt win historic decision at Supreme Court of Canada

The decision essentially reverses a 1956 declaration the Sinixt were extinct

MLA Shirley Bond, right, answers questions during a press conference at Legislature in Victoria, B.C., on February 19, 2019. THE CANADIAN PRESS/Chad Hipolito
Former B.C. gaming minister says she wasn’t told directly about dirty cash flowing to casinos

Shirley Bond said Thursday civil forfeiture, gang violence and gambling addiction were also major concerns in 2011

RCMP Constable Etsell speaks to tourists leaving the area at a police roadblock on Westside Road south of Fintry, B.C., Thursday, July 23, 2009. THE CANADIAN PRESS/ Yvonne Berg
B.C. police say they take ‘exception’ to conducting roadblocks limiting travel

Asking the police to enforce roadblocks exposes officers to further risk and possible COVID-19 infections, says federation president Brian Sauve

As part of the province’s strategy to combat the opioid overdose crisis, take-home naloxone kits have been distributed throughout the province. (Courtesy of Gaëlle Nicolussi)
Vancouver Island could be at its worst point of overdose crises yet: medical health officer

Island Health issued overdose advisories for Victoria, various communities in the last two weeks

BC Hydro released a survey Thursday, April 22. It found that many British Columbians are unintentionally contributing to climate change with their yard maintenance choices. (Pixabay)
Spend a lot of time doing yard work? It might be contributing to climate change

Recent BC Hydro survey finds 60% of homeowners still use gas-powered lawnmowers and yard equipment

Join Black Press Media and Do Some Good
Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Journal de Montreal is seen in Montreal, on Thursday, April 22, 2021. The daily newspaper uses a file picture of Prime Minister Justin Trudeau dressed in traditional Indian clothing during his trip to India to illustrate a story on the Indian variant of the coronavirus. Paul Chiasson/The Canadian Press
Montreal newspaper blasted for front-page photo of Trudeau in India

Trudeau is wearing traditional Indian clothes and holding his hands together in prayer beside a caption that reads, ‘The Indian variant has arrived’

Most Read